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INVESTORS’ CORNER: What is a Note?

By Tom Zeeb

What Exactly Is A Note?

Why Ignore Profits in the Note Business, when you are already in it? (Surprised?)

Most real estate investors have heard of the “Note Business” but many misunderstand it while others think that it is separate from the real estate business. The fact is, most real estate investors are in the note business, and they just don’t know it. The note business is the financing side of the real estate business. In the simplest terms, the note business is based upon the purchase, sale, and assigning of two documents: the promissory note and the mortgage agreement. These two documents represent a promise to pay and a solution for non-payment.

Note = Promissory Note = IOU (I Owe You) Mortgage = Collateral Agreement = Foreclosure Agreement

When someone borrows money to purchase real estate, they must sign an agreement to promise to pay it back. This agreement also outlines the terms of the payback. This written promise is not enough to get a loan. This promise must be backed by collateral of value, which is typically the real estate itself.

The collateral agreement pre-authorizes the foreclosure of the property if the debt is not paid according to the promissory note.

  1. Move from the Paying End to the Receiving End of the Business. So, if you have ever borrowed money from a traditional lender, private or hard-money lender, or even a property seller, you have been in the “note business”! Well, you have been on the paying side of the note business.

So why not get on the receiving end of the note business? In the receiving end of the note business, you can:

* receive monthly cash flow without the headaches and liabilities of being a landlord,

* get lump sum cash payouts,

* even end up with the property at 30 to 40 cents on the dollar.

  1. Acquire Property or Cash Flow for Pennies on the Dollar. Today’s inventory of both performing and non-performing notes is so massive that it doubles the number of foreclosures since 2008. Let’s start with some basics:

NON-PERFORMING

When you buy a non-performing note on a vacant home, you will acquire a “Deed in Lieu” or foreclose and end up with the property.

You are a real estate investor simply acquiring property in a different way.

If you buy a non-performing note on an occupied property, you will either modify the loan to start receiving monthly cash flow, get a Deed in Lieu, or foreclose.

PERFORMING

When you purchase a performing note, you acquire long term, real estate backed, monthly cash flow.

Today, these assets can be purchased for 60 cents on the dollar. That is an unbelievably good deal. No land lording, no hassles, just automatic monthly deposits into your account.

Tom Zeeb is the president of Traction REIA in Washington DC and can be contacted at: https://TractionRealEstateMentors.com. Tom is a long-time friend of www.MetrolinaREIA.com, and speaks nationwide on Wholesaling.

 

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